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Monday, August 21, 2006

Iconix Rewarded For Buying London Fog Brand

Iconix Brand Group Inc. (ICON) shares rose 3.2% to $14.96 today after the company announced the acquisition of the London Fog brand from London Fog Group Inc., subject to certain closing conditions including final approval from Nevada state bankruptcy court. The acquisition is scheduled to close on August 28, 2006. This deal should be viewed as a key win. ICON trades with a 21 P/E and a market cap of $586 million. Its 52-week trading range for the stock is $7.66 to $18.09; its trailing 12-month EPS is stated as $0.69; and street estimates put 2006 EPS at $0.73 EPS for 2006 (20.5 forward P/E) and $0.90 for 2007 (16.6 forward P/E). These forward EPS estimates may actually go higher for 2007 based on London Fog and based on Mossimo closing this year, although the expenditures could hit 2006 estimates.

Founded in the 1920s, London Fog today is an internationally recognized brand of men's, women's and children's outerwear, apparel, accessories, luggage and travel products. According to a 2006 Women's Wear Daily study, London Fog ranked as the #1 most recognized brand of outerwear in the United States.

The Company has also announced that it will enter into a license agreement with leading outerwear maker Herman Kay Bromley. Herman Kay Bromley will hold the license for men's and women's outerwear and women's suits in the United States. The Company is currently evaluating numerous additional domestic and international licensing opportunities and will announce a more expanded licensing program shortly. owns, licenses and markets a growing portfolio of consumer brands including CANDIE'S®, BONGO®, BADGLEY MISCHKA®, JOE BOXER® RAMPAGE® and MUDD®. The Company has also signed a definitive agreement to purchase the brand MOSSIMO® which is anticipated to close in September of this year.

So far it looks like the street is liking the deal. London Fog had some sell-through issues in the late-nineties that carried over, and the old issues with the Mossimo brand just start with the old gang-wear problems. Iconix has a history of turning old tired brands around, so this looks as though the investors that have paid attention on a dead August trading are thinking the company will do the same with these. The company has only traded about 223,000 shares today, half its normal volume.

Jon C. Ogg
August 21, 2006

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